It is frequently claimed that the subsidy cost of offshore wind farms has fallen over the past few years. The UK government itself is on record as recently as November 2020 claiming that:
Government support to unleash the potential of offshore wind generation has seen the cost of it fall by two thirds in the last 5 years.
Echoes of these claims are commonplace. The Times (08.07.21) reports the think tank Policy Exchange as remarking that “the cost of offshore wind power had fallen steeply in recent years”.
As work by Professor Gordon Hughes has shown, the capital and operating costs of offshore wind do not support these observations, and, as this blog will demonstrate, it is a matter of fact that the cost of consumer subsidies to offshore wind per unit of electrical energy generated (MWh) has risen and continues to rise year on year.
Read more: Offshore Wind Subsidies per MWh Generated Continue to Rise
On the 10th of April this year Professor Gordon Hughes of the University of Edinburgh submitted a paper on the economics of small-scale wind generation in Northern Ireland as formal evidence to the "Inquiry into Generating Electricity from Renewable Energy” conducted by the Public Accounts Committee of the Northern Ireland Assembly.
Read more: Public Accounts Committee Evidence on the Economics of Small-Scale wind generation in NI
Professor Gordon Hughes has written the following blog describing his experience of sourcing reliable energy supplies to power a remote rural broadband network in Scotland.
I have written a number of papers on the costs and performance of wind power and other forms of renewable energy. Even serious empirical research provokes responses along the lines that any questioning of the merits of renewable energy amounts to original sin or blasphemy. There is little that I – or anyone – can do to convince those who treat the superiority of renewable energy as an article of faith. Still I wonder how much practical experience such commentators have of the reality of relying solely on renewable power in commercial applications. For this reason other readers may be interested in what I have learned as an economist faced with the practical issue of relying upon renewable energy.
Read more: The reality of relying upon renewable power: a personal view
Renewable energy is often claimed to empower local communities as well as providing economic benefits. Part of the logic is that renewables seem to offer “energy independence”. The truth is less straightforward. In this article, co-authored with Professor Gordon Hughes of Edinburgh University, REF examines the case of the Viking Energy wind farm in the Shetlands and more broadly that of Scotland itself.
Read more: The Shetland Islands: Renewables and Corporate Interests
The following is the text accompanying the talk given by Professor Gordon Hughes, School of Economics, University of Edinburgh on 4 November 2020 to launch his two new reports for REF on:
Wind Power Costs in the United Kingdom and
The Performance of Wind Power in Denmark
For a recording of the event, please click here.
It is difficult to make predictions, especially about the future. [Attributed variously to Niels Bohr (Nobel Prize in Physics) and Sam Goldwyn (movie mogul)]
The theme of my talk is the disparity between predictions about the future costs and performance of wind power (especially offshore wind) - the Rhetoric - and the actual evidence that is available on what it costs to build and operate wind farms and the amount of power they produce over their lifetime – the Reality.
REF will shortly publish major new analysis by Professor Gordon Hughes, under the title Wind Power Economics: Rhetoric and Reality.
The study contains two volumes, one on the Performance of Wind Power in Denmark and the other on Wind Power Costs in the United Kingdom.
On the basis of a large and detailed statistical analysis of audited accounts and other performance data Professor Hughes shows that far from falling dramatically, capital costs for wind power have come down only slightly, and that Operation and Maintenance (O&M) costs required to maintain energy yields are actually rising sharply, throwing the medium and longer term economics of the entire enterprise into jeopardy.
The study will be published shortly with a webinar, and anyone interested in being added to the mailing list for that announcement should write to us at REF at
In the course of preparing this work and discussing it widely with colleagues we have become aware that the findings are surprising to many, particularly to some industry players who enjoy special circumstances unrepresentative of the overall wind sector.
An example of these special circumstances may make the point clear. Northern Ireland has several hundred small (< 250 kW) and apparently old turbines that are still making money. Some might say, and indeed REF has heard it said, that the empirical experience of these wind turbine operators should count for more than statistics, even if the statistical analysis is based on real cost data from audited accounts and authoritative records of real generation such as that behind Professor Hughes’s study.
While speciously persuasive this proves to be a good example of how dangerous it is to rely on limited, personal or anecdotal information when forming a general view. Uncle Wilfred may indeed have lived to a hundred on a diet of cigars and whiskey, but that is no recommendation for the rest of us. By the same token, closer examination of the situation in Northern Ireland shows it is no guide to the rest of the sector.
Read more: Extreme Subsidies to Small Wind Farms in Northern Ireland: A Bureaucratic Oversight?
A series of unwelcome records were broken over the Bank Holiday weekend period, from Friday the 22nd to Sunday the 24th of May, 2020.
(i) Constraint payments made to wind power to reduce output within the Balancing Mechanism were £9.3 million - the highest ever paid for any three-day period (Sunday Telegraph “Wind Farms Paid Record £9.3m to Switch off their Turbines”).
(ii) System electricity prices dropped below zero for long periods with a record average price of -£17 per MWh being recorded on the 22nd.
(iii) Intermittent day-ahead prices used to calculate CfD subsidies averaged -£10 per MWh on the 23rd, the first time the average for an entire day has been negative.
The cost to the consumer of balancing electricity over this chaotic weekend is in excess of £50 million (The Times “National Grid pays out £50 million to turn power down as lockdown hits demand” .
There have been no constraint payments to Scottish wind power in the UK’s Balancing Mechanism (BM) since the 21st of April and up to the date of writing (7th of May). This is welcome after a very expensive start to the year when consumers paid £95 million to discard Scottish wind output from the 1st of January to the 21st of April..
But the reduction in constraints is not the result of improved balancing techniques or the return to service of the hitherto troubled Western Link interconnector. Rather, it is the result of low wind generation in Scotland reducing congestion within the country and over the links to England. Consequently exports to England have been declining for some weeks.
Read more: Low Wind Output in Scotland Cuts Constraint Payments… and Exports
The cost of excess wind power in the first two months of 2020 amounted to £72 million in payments to wind farms to reduce output, mostly (£69 million) in Scotland. Last year’s annual total of £139 million was a record, but does not seem likely to remain so for long.
Comparing payments in January and February for all years back to 2012 we find that the total for those months in 2020 is nearly four times that in the next most expensive year, as shown in the following chart.
Read more: Why have Windfarm Constraint Payments Spiked in 2020?
When there is a collision between different government policies with the same purpose the result is sure to be messy, and the chances are that the benefits arising from both policies will be compromised and perhaps lost altogether. The Scottish Government, for example, aims to reduce carbon dioxide emissions through the enhancement of carbon sinks, such as forestry and peat, while also encouraging the generation of electricity from industrial wind power. Since both projects are land hungry and the United Kingdom’s geographical area is finite or even diminishing, it is highly unlikely that targets for forestry and peatlands, on the one hand, and renewables on the other can be simultaneously approximated, let alone met and maximised.
Read more: Land Use for a Low Carbon Future: Forestry and Peat versus Wind Power
Last weekend the Italian cable manufacturing company, Prysmian, released a statement announcing to the markets that the Western Link High Voltage Direct Current (HVDC) interconnector between Hunterston and Deeside had failed again, on the 10th of January. This grid link, which is a joint venture between Scottish Power Transmission (SPT) and National Grid (NG), employs cables manufactured by Prysmian.
This £1 billion project has a peak transit capacity of 2.25 GW and was designed solely to facilitate the export of Scottish wind power to the English and Welsh markets. In doing so it was expected to reduce constraint payments to wind power, payments which amount to £630m since 2010, with a record £130 million in 2019 alone.
The project was expected to come online at the end of 2015 but in fact did not become fully operational until late 2018 and has been plagued with faults ever since.
2019 was the tenth year in which British wind farms have received constraint payments to reduce their output because of electricity grid congestion. There has been a total of £649 million paid out over the decade for discarding 8.7 TWh of electricity. To put this in context, this quantity of energy would be sufficient to provide 90% of all Scottish households with electricity for a year.
Because of a rapid growth in wind farms, particularly in Scotland, the total paid has tended to increase year on year in spite of grid reinforcements and new grid lines such as the £1 billion Western Link from Hunterston to Deeside, which was built specifically to export wind power from Scotland to English and Welsh consumers. Figure 1. displays this trend, showing payments rising from £174,000 in 2010 to a new record cost of more than £139 million. The quantity of electricity discarded in 2019 was also a new record at 1.9 TWh.